Thomas MaCurdy: The Minimum-Wage Stealth Tax on the Poor – WSJ

One problem is that only about 5% of families have children and are supported by low-wage earnings; another is that higher minimum wages cause some workers to lose their jobs. Advocates of a higher minimum wage argue that the number of workers who gain far exceeds those who lose. Whatever the credibility of this calculus, there is yet another problem: If someone’s income is arbitrarily increased thanks to a legislatively mandated wage increase, someone else must pay for it.

Since economic evidence indicates that higher minimum wages don’t significantly affect employers’ profit rates, advocates instead say that employers will pass on these increased labor costs by raising the prices of their goods and services—and that “society,” or more affluent consumers, will pay these costs.

But will low-income families earn more from an increase in the minimum wage than they will pay as consumers of the now higher-priced goods? My research strongly suggests that they won’t.

via Thomas MaCurdy: The Minimum-Wage Stealth Tax on the Poor – WSJ.

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